gringa musings from a rooftop terrace in Oaxaca

Expressing the outrage

Monday’s headline from the Huffington Post read, “Enrique Peña Nieto’s TIME Cover Sparks Outrage In Mexico.” The Time Magazine cover (to be published February 24, 2014) shows an imperious looking Peña Nieto, with the bold-face headline, “Saving Mexico.” Judging from personal conversations, numerous articles, and marches throughout the country, that is definitely not the way most Mexicans see their president.

Elected in 2012, Peña Nieto has proposed sweeping reforms, including a previously mentioned education package modeled after the disastrous US, “No Child Left Behind Act.” These unpopular reforms have citizens marching in the streets and calling for Peña Nieto’s head. One of the reforms that Mexicans find most egregious is the proposal to open Mexico’s state-run oil industry, PEMEX, to foreign investment. This is one that strikes at the heart of Mexican pride.

A little background: In 1938, in support of oil workers striking against foreign-owned oil companies, Mexico’s president, Lázaro Cárdenas, citing the 27th article of the 1917 constitution, expropriated the Mexican facilities of the United States and Anglo–Dutch oil companies, nationalized the oil reserves, and created the state-owned Petróleos Mexicanos (aka, PEMEX). Mexico now owned and controlled this valuable resource.

Back to the present: According to the Huffington Post article, “The energy bill, however, faced massive protests when it passed through Congress in December. Demonstrators shouted ‘The homeland is not for sale!‘ as officials voted to allow private companies to exploit oil and gas reserves in the country, according to the Associated Press.”

In true Oaxacan fashion, marches have been held and banners, posters, and murals have gone up throughout the city to express the outrage and indignation felt by a majority of Mexicans at what they see as an attempt by the Peña Nieto government to sell-off their patrimony.

Of course, as the Time Magazine article illustrates, the US is applauding Peña Nieto and the actions of his ruling party.

24 Responses

I’m not applauding…. so I guess not all of the US is.
It’s always nice to hear about the protests in Mexico….. people at least try to stand up to the government there! They aren’t so indoctrinated into believing everything the government does is for their good, as most people around here are…… of course there may be protests going on here too, but there is less and less coverage of them.

Enrique Peña Nieto has refused to have a Referendum on the privatizing of Pemex. Pemex can contract out services so there is little financial need to more fully solicit private enterprise. I recently read that some $1.2 Billion of oil is siphoned off by cartels. Surely addressing such losses would address whatever foreign investment Nieto is claiming to need.

Its the way of the right wing – private interests prevail at public expense; sell off public assets to reduce government and the social ties that bind. It feels sad to witness this development. All that hard won work and sacrifice gone with an arbitrary stroke of a pen.

Perhaps someone opposed to the new energy policy might simply explain why the reforms would be so bad for Mexico? Cardenas’ obsolete oil nationalism dogma of the 1930’s appears to trump reason in the present reality.

Gail:
There is more to running a country than running Coke Mexico, or any business for that matter. As you know Gail, Mexico has been invaded many times and so the people here treasure their independence more visibly than most countries (especially invadER countries) that I have seen. In this context, owning their oil has symbolic value, indicating they control their own territory.

Speaking in a strictly economic basis, as an economist, I don’t quite grasp how giving a share in oil reserves is the panacea to improving exploration, development, and distribution given PEMEX can already contract these activities to the private sector, including multinationals. What I find curious is how the government “lets” cartels tap the pipelines for $1.2B rather than police the pipelines to stop this theft. There are surely enough police to do so (were there a political will). I expect that amount of money would significantly supplant the need for investment capital now being sought offshore.

Amen ! Could not have said it better than Ian H. Following the “theft” of the (US SW ) from Mexico, how in the world, economically, politically or otherwise could justify this “not so bold” move ! Appeasement ? Self interest such as a previous Salinas Gotari ?… Detraction from Narco worries ? Time will tell.

I too have not heard an adequate justification for allowing multinationals to share the reserves and possibly downstream action, including retail outlets – wait for Exxon and Shell stations to start popping up. This is speculation of course but nothing I read contradicts.

I would add that nationalizing (not expropriating as there was fair market compensation) the oil and gas industry took huge courage and Mexico had to stare down the UK, US, and Dutch. Kudos to then-President Lázaro Cárdenas.

Mexico needs investment of more than $60 billion a year for the establishment of new oil wells – just to keep pace with domestic demands. At present PEMEX can only manage less than half of that. It has $100 billion in pension liabilities and $90 billion in long term debt and it continues to lose money as the pressure in the depleting Cantarell field lowers . Mexico is sitting on one of the largest shale-gas and shale-oil deposits in the world plus unexplored deep water sources, but does not have the money or experience to extract it. PEMEX cannot do everything alone, other players must be brought in. It needs the help of global oil companies which have developed the means to tap deep-water oil fields and extract shale oil as well. We should understand that xenophobic oil nationalism is no longer an option.

The funds to buy out the foreign-owned multinationals came from a Mexican-wide donation campaign; people contributed heirlooms, jewellery, pesos, whatever they could to regain control over their resource, in keeping with the Constitution. I doubt the amount of money you cite could or would be raised in this manner today. The expertise you allude to can be bought in the form of exploration and development contracts.

$60B is a lot of money so foreign investment in exchange for a piece of the action seems desirable. However, the $60B is needed over time, not all at once. Mexico could reduce reliance on oil by aggressively developing green energy alternatives to electrical generation and even vehicles, notably solar. Along with an increase in gas and car taxes, stronger emission standards, and public awareness campaigns, per capita demand could fall. It is hard to justify an assumption that demand for oil will need continue on the basis of historical data. Mexico is blessed by the fact it doesn’t need oil for heating. Let’s not use $60B as a NOW! figure — spread it out realistically – and take meaningful steps to calm and reduce demand, including bolstering alternative forms of energy.

And, not so by the way, the atmosphere – global warming – demands we think harder and creatively about supplanting fossil fuels. Going to the “same old oil well” no longer works planetarily speaking.

“Two-thirds of Mexico’s oil fields are in decline. Pemex estimates that oil output at the country’s top producing field, Ku Maloob Zaap, will drop 60 percent over the next decade. We also must remember, this pattern of falling oil production and increased domestic consumption is taking place in most of the oil exporting countries of the world.

The giant and supergiant oil reservoirs, like Cantarell, discovered more than 30 years ago,were produced irrationally at accelerated rates and are now in an advanced stage of decline or are practically exhausted.

The rate of increased production from new oil discoveries will be slower than the rate of decline of existing mature oil fields because of delays and inefficiencies in development.

Because of these considerations, I believe that neither opening up exploration and production of mature fields to private investment nor applying new technologies to development of unconventional resources (shale oil and tight oil sands) will be able to add significantly to oil production.All that can be hoped for is that the decline will abate and production will remain well above domestic refining capacity of about 1.5million barrels per day in order to avoid having to import feedstock.

Increasing investments in the belief that they will lead to increased overall production is a grave strategic error. It will continue to cause enormous value destruction for PEMEX and Mexico.”

It struck me as a leap of logic too. Latin has a phrase to sum up just about anything. 🙂

Protests thus far seem to be more smoke (expected) than fire. Independence and the price paid seem to be mostly stale news in this context. People seem confident in their national identity and optimistic/realistic enough to hold their noses to enable the change.

Ian, thanks for taking up the discussion and expanding on my post! I returned to Oaxaca a couple of days ago, after visiting family in the US and am now attempting to catch up after 3+ weeks away. Again, your contributions are much appreciated.

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